Price theory. RIP?

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Tyler Cowen has a new book, The Marginal Revolution: Rise and Decline, and the Pending AI Revolution. The book is much more wide-ranging, but at one point, he writes a eulogy for price theory. Maybe not dead exactly, but more like a distinguished elder statesman that the profession has stopped listening to. Price theory, he argues,has moved to being a niche interest in economics. To some economists, especially from a few decades ago, that may sound almost contradictory, almost like saying “economics has become a niche field within economics.” Well, that is a bit true as well.He quotes Steve Levitt, who retired from the University of Chicago at 57, on price theory: “I gotta say that the Chicago price theory really has lost.” And “I think it is essentially lost to posterity at this point.”Not so fast. There’s a big difference between mostly dead and all dead. Mostly dead is slightly alive.Sure, he’s probably right about the academic market. As he points out, theoretical papers in the top journals fell by 30% percentage points from 1963 to 2011. This has been documented for decades now and applies to theory more broadly than just price theory. He describes how graduate programs increasingly recruit math and computer science majors, on the theory that “the economics you can figure out along the way, or for some topics you may not need to know much of it at all.” Kevin Murphy no longer teaches the Chicago PhD price theory course. Kevin also no longer teaches the Chicago Price Theory Summer Camp has trained hundreds of PhD students over 14 years, including being foundational for …